As the OECD* prepares to deliver the first phase of its BEPS** action plan in Australia this week, the Grant Thornton International Business Report (IBR), a survey of 2,500 senior executives in 34 economies, finds the majority of businesses calling for more transparency on acceptable planning. The survey also finds businesses calling for updated tax rules for a modern, digital economy and the harmonisation of global corporation tax rates.
Wendy Nicholls, Partner at Grant Thornton UK LLP, said: “We have been tracking business sentiment on the need for more transparency in tax planning since news surrounding the tax practices of several large multinationals broke last year. And the response has been pretty clear: business leaders want things in black and white. They have a responsibility to their investors and shareholders to keep costs down. In their words, simply telling them to pay their ‘fair share’ is not proving to be a viable alternative to a clear set of rules or principles."
"That is why we are fully supportive of the work being undertaken by the OECD which should go some way to allaying business concerns by moving this debate away from talk to action. International tax standards clearly need to be stripped down and rebuilt for the world we live in today. The existing legislation is no longer fit for purpose in an increasingly interconnected, digital world in which the definition of a 'border' is archaic and next to meaningless."
Businesses in Latin America (92%) and Europe (76%) particularly think that the global tax systems could be improved by providing more transparency in what is acceptable tax planning, ahead of North America (60%) and Asia Pacific (44%). In Latin America (92%) again business leaders want to see updated tax rules for a modern, digital economy, ahead of Europe (68%), North America (65%) and Asia Pacific (39%). Harmonising global corporation tax rates is advocated by the majority of businesses in Latin America (87%), Europe (66%) and North America (62%).
UK business leaders' responses largely mirrored those of their wider European counterparts, with 77% believing global tax systems could be improved by providing more transparency in what is acceptable tax planning and 70% wanting to see updated tax rules for a modern, digital economy. Harmonising global tax rates was advocated by 57% of UK executives.
Globally, 82% of business leaders cite tax policy and risk as a priority (79% in the UK) and 39% as a major priority (19% in the UK). A further 44% believe G20 action on transparency and avoidance would help them grow their operations, but just 23% believe this is likely to get the required global agreement. In the UK, only 26% believe G20 action on transparency and avoidance would help grow their operations, and just 8% believe this is likely to get the required global agreement.
Martin Lambert, Partner at Grant Thornton UK LLP, added: "Tax planning emerges as a major issue for business leaders around the world and the call is for global action to update transfer pricing guidance to boost growth prospects. You just have to look at recent climate change negotiations to see how hard it is to build multilateral agreements on complex issues where different territories are fighting to protect sovereignty. But we are hopeful that momentum will build when the first phase of the OECD action plan is released later this month. The road ahead is undoubtedly bumpy, but the potential rewards are worth the tough journey."
* Organisation for economic cooperation and development
** Base erosion and profit shifting